Operator: Ladies and gentlemen, thank you for standing by. Welcome to Elbit Systems' Third Quarter 2024 Results Conference Call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. I would now like to hand over the call to Daniella Finn, Elbit Systems' VP - Investor Relations. Daniella, please go ahead.

Daniella Finn: Thank you, Daniel. Hello everyone and welcome to our third quarter 2024 earnings call. On the call with me today are Butzi Machlis, President and CEO; Kobi Kagan, CFO; and myself, Daniela Finn, VP, Investor Relations. Before we begin, I would like to point out that the safe harbor statement in the company's press release issued earlier today also refers to the contents of this conference call. As usual, we will provide you with both GAAP financial data as well as certain supplemental non-GAAP information. We believe that this non-GAAP information provides additional transparency to help understand the performance of the ongoing business. You can find all the detailed GAAP financial data as well as the non-GAAP information and the reconciliation in today's press release. Kobi will begin by discussing the financial results followed by Butzi who will elaborate on the main events during the quarter and beyond. We will then turn the call over to a Q&A session. With that, I would like to now turn the call over to Kobi. Kobi, please go ahead.

Kobi Kagan: Thank you, Daniella. Hello everyone and thank you for joining us today. The financial results of the third quarter of 2024 continue to reflect the ongoing strong demand for our technology and solutions and the progress in the implementation of our operational improvement plans. In fact, this is the third consecutive quarter where we recorded double-digit revenue growth. Turning now to the results of the third quarter. Third quarter revenue increased by 14% to $1.718 billion compared to $1.502 billion in the third quarter of 2023. In terms of quarterly revenue by segment, Aerospace revenues increased by 7% in the third quarter of 2024 compared to the third quarter of 2023 mainly due to increased UAS sales in Israel. C4I and Cyber revenues increased by 13% year over year mainly due to radio system and command and control system sales. ISTAR and EW revenues increased by 13% mainly due to electronic warfare and electro-optical system sales. Land revenues increased by 24% due to the increase in ammunition and munition sales in Israel. Elbit Systems of America revenues increased by 17% mainly due to increase in night vision systems and medical instrumentation sales. Elbit Systems' diverse geographic revenue base helps to reduce revenue volatility and support the long-term sustainability of our business. In the third quarter of 2024, Europe contributed 25% of revenues, North America contributed 23% of revenues, Asia-Pacific 18% of revenues and Israel contributed 29% of revenues. Israel revenues continued to grow on the back of the prolonged conflict in the region, mainly in the land segment. The non-GAAP gross margin for the third quarter was 24.4% compared to the third quarter of 2023 at 24.9%. GAAP gross margin in the third quarter was 24% of revenues compared to 24.5% in the third quarter of 2023. Third-quarter non-GAAP operating income was $140.7 million or 8.2% of revenues in the third quarter of 2024 as compared to $120 million or 8% of revenues in the third quarter Of 2023. GAAP operating income for the third quarter was $125.8 million or 7.3% of revenues as compared to $106 million or 7.1% of revenues in the third quarter of 2023. The operating expense breakdown in the third quarter was as follows. Net R&D expenses were $119.9 million or 7% of revenues in the third quarter of 2024 as compared to $103.3 million or 6.9% of revenues in the third quarter Of 2023. This increase was mainly due to additional R&D efforts in our land segment and continuous investment in our high-power laser solutions. Marketing and selling expenses were $91.3 million or 5.3% of revenues in the third quarter of 2024 as compared to $86 million or 5.7% of revenues in the third quarter of 2023. G&A expenses were $75.7 million or 4.4% of revenues in the third quarter of 2024 as compared to $78.8 million or 4.8% of revenues in the same period last year. Financial expenses were $45 million in the third quarter of 2024 as compared to $35.7 million in the third quarter of 2023. The increase in financial expenses is due to the elevated interest rates in both the US and Israel. Additionally, the rapidly growing backlog due to the Sword of Iron War required higher levels of working capital expenditure. We recorded a tax expense of $12.8 million in the third quarter of 2024 compared to $10 million in the third quarter of 2023. The effective tax rate in the third quarter of 2024 was 14.6%, similar to the rate in the third quarter of 2023. Our non-GAAP diluted EPS was $2.21 in the third quarter of 2024 compared to $1.71 in the third quarter of 2023. GAAP diluted EPS was $1.77 for the third quarter of 2024 compared to $1.36 in the third quarter of 2023. This is the second consecutive quarter of double-digit EPS growth. Our backlog of orders as of September 30th, 2024, was $22.1 billion, approximately $5.5 billion higher than the backlog at the end of the third quarter of 2023. In the third quarter of 2024, the company recorded new orders of $2.7 billion, of which $1.4 billion came from Israeli market, approximately 66% of the current backlog was generated from outside of Israel. Approximately 37% of the current backlog is scheduled to be performed during the remainder of 2024 and in 2025, while the rest is scheduled to be performed during 2026 and beyond, which demonstrates the potential of the continuous growth of the company. Operating cash flow for the nine months ending September 30th, 2024, was $83 million inflow compared to $200 million outflow for the same period last year. The Board of Directors has declared a dividend of $0.50 per share. I will now turn the call over to Mr. Machlis, Elbit's President and CEO. Butzi, please go ahead.

Butzi Machlis: Thank you, Kobi. As in the past year, I would like to express my ongoing gratitude and appreciation for our global workforce who continue to demonstrate their ongoing remarkable commitment to our customers worldwide during these times of elevated demand for cutting-edge products and solutions. In order to meet the continued increased demand of our solution, we expanded production facilities, increased inventories -- inventory level in order to address the growing backlog and supply chain challenges and continue to recruit employees. This is the second consecutive quarter we are proud to report over 25% increase in our EPS year over year and the third consequent quarter in which we report double-digit revenue growth. In addition, we recorded a record backlog of $22.1 billion. All these are clear testament of our product and technological superiority. These accomplishments, among others, have continued to the advancement of our internal revenue target to reach over $7 billion by 2025 and our internal target of 2026 non-GAAP operating margin of around 10%. We continued to receive significant orders which I will discuss in detail. Yesterday, we announced that Elbit Systems was awarded contract worth of total amount of approximately $335 million to supply defense system to an European customer. The contract includes a supply of PULS, Precise and Universal Launching Systems, rocket launcher and rockets as well as Hermes 900 UAV equipped with advanced payloads. These are two of our flagship business lines which are in high demand globally. These contracts follow a number of success we announced during the quarter. Our extensive RD effort in the past years resulted in a contract to supply high-power laser for the Iron Beam air defense system. This breakthrough technological solution provides a robust defense against a variety of threats. We are extremely proud of this development and believe it will be meaningful and meaningful technology in the modern battlefield. We continue to win new contracts to supply our Iron Fist Active Protection System solution. The latest contract is for the US Army's Bradley IFV. This solution is aimed at enhancing the self-defense capabilities of the armed platforms against modern battlefield threats. It is characterized by high performance and low volume, low weight and power requirements. The system provides armed platforms with 360-degree protection from a wide variety of anti-armor threats such as anti-tank rockets, anti-tank guided missiles, UAS and loitering threats in both open terrain and complex urban environment. Finally, Elbit Systems was awarded as a partner of the Israeli Defense Ministry the 2024 Israel Defense Prize for three separate innovative defense technological systems. These include a prize for the role of the Citron Tree and Golden Almond battle management system in the David's Sling early phase developed by Elisra, an Elbit subsidiary. Elbit Systems was also recognized for its role in developing technology for the IDF's Namer heavily armed personnel carrier as well as for a Israeli classified system. Our ongoing success has been driven by two key factors, Elbit Systems' extensive geographical presence across Europe, North America, Asia and Israel and our wide portfolio of advanced technological solutions which have proven highly effective in increasing global defense budget. On behalf of myself and the entire company, we continue to deeply wish for the immediate release of all hostages held captive in Gaza. They are constantly in our heart and mind and we eagerly await for their safe return home. And with that, I will be happy to take your questions. Operator?

Operator: Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] Your first question is from Ellen Page.

Ellen Page: Hi guys, thanks for the question and congrats on the quarter. I just wanted to ask about the Iron Beam contract that you received in the quarter. I think that's one of the first like near-term high-powered laser contracts that you've received, unless I'm mistaken. And I just wanted to talk -- wondered if you could talk about that opportunity over the next three to five years and how you think about that program contributing to revenue.

Butzi Machlis: Thank you, Ellen. We in Elbit, we believe that energy weapons are a growth engine for the company and we invest in technologies in several domains. One of them is high-power lasers. There are great advantages for high-power lasers. Actually based on such systems you can defeat several threats in a very economical way. We hope to deploy next year together with IMOD, the third land high-power laser, together with Rafael, the Iron Beam system. However, in parallel, we continue when we see a lot of potential for these systems abroad as well. In parallel we continue to develop the urban solution. The urban solution, which we lead in Elbit has great potential activating high-power lasers from the earth will enable us to reach long distances and to increase effectiveness of the system. We are a world leader in such technologies and we see a growing potential for high-power lasers in general and for additional energy weapons as well.

Ellen Page: Thanks, that's helpful. And then as kind of an offset, European sales were down 13% year over year. I think it was a tough comp, but just given a potential change in the funding environment as it relates to US supplementals in that region, how are you thinking about the opportunity in that region going forward and the demand environment in Europe over the next few years?

Kobi Kagan: Hi, Ellen, this is Kobi. So we experienced this quarter a 17% increase in our Elbit Systems of America sales year over year. And this is because of our position in the market and as we mentioned, higher night vision sales, higher medical instrumentation sales. And those are the principal issues. So, our position in the US, we believe that we're positioned to additional growth in the future. As to the European market, the European market is, we believe will experience higher demand as the push for higher defense expenditure will come and, of course, the threat that this market is experiencing. And just Yesterday, announcement of $335 million of European market win of two of our high runner systems, both the PULS and the UAS, the 900 MALE experiencing this potential for the company for additional growth in the future.

Ellen Page: Thank you. I'll leave it there.

Kobi Kagan: Thank you very much, Ellen.

Operator: The next question, Ella Fried from Bank Leumi. Please go ahead.

Ella Fried: Hello, it's Ella. I can't hear you very well.

Butzi Machlis: Hello, Ella, it's Butzi. Good afternoon. We hear you very well here.

Ella Fried: Great. Okay, thank you. First, I would like to congratulate you on the results and on the exceptional growth. And I would like to discuss a bit further your growth targets. First, the growth of 2025. We actually don't hear so much about your plans beyond 2025. I know that it will be depending very much on the political and geopolitical environment. But still, I'm sure you have some assumptions. Do you see the growth beyond 2025, 2026 steady or you have other milestones that are leading you to some more growth jumps?

Butzi Machlis: Hello, Ella, Good afternoon. As we see -- as you can see from our backlog, the company will continue to grow in the coming years and we expect two-digit growth in the coming quarters in order to deliver the volume of the backlog we have. We see growing demand all over the world for our solutions. We see it in Europe, we see it in the US, we see it in the Far East and, of course, in Israel. Therefore, I expect the company to continue to grow in the future as well. It's difficult for me right now -- and our backlog, by the way, covers not just 2025, it covers also the year after 2025. We have a nice coverage also for 2026 and beyond. It's difficult for me to predict what would be exactly the numbers in the far future. But I'm quite confident that the company will continue to grow also in the future based on the demand we see right now in the markets.

Ella Fried: I would like to go [Multiple Speakers]

Butzi Machlis: I just want to say that our internal goal was to reach $7 billion by 2026. We are almost there already. So, it's quite obvious that next year we will be above $7 billion. And as I said, we expect to grow further in 2025 and in 2026. And actually the main bottleneck right now to -- in order to convert the backlog to revenues and to profit is execution -- is our ability to produce stuff. In order to meet this, we are enhancing our capabilities. We are going to inaugurate quite soon a new facility for UAVs. We are going to activate the production line in Ramat Beka together with the production line in Ramat Hasharon, the current ones that we have in Ramat Hasharon and we are expanding quite a lot our production lines for communication for other stuff. So there is a growing demand. The backlog is also -- is quite high and I expect the company to continue to grow in the coming years.

Ella Fried: Well, if I can interpret what you said, you actually mean that even beyond 26 you expect not only these numbers to be sustainable, but you expect steady growth. You don't know which phase, but you expect the steady growth to continue.

Butzi Machlis: I think that in general the answer is yes. And I didn't mention, of course, acquisitions. As you know, acquisition is part of our strategy. We continue, we know how to merge companies into Elbit and we are looking intensively for additional acquisitions for the company. We are looking for new technologies which we miss in our portfolio and we're also looking for new positions in the international market.

Ella Fried: Thank you.

Butzi Machlis: What we just mentioned was organic growth.

Ella Fried: Thank you. The following question actually refers to your internal and external target, which is the 10% non-GAAP operational income. And the question is we are now in a quite positive environment in terms of a conversion and you still have, I'm not sure that optimal but quite positive value of the hedge given the time that passed. So, does it mean that most of the improvement will be through operational income and we should less expect dramatic improvement in gross margin?

Kobi Kagan: Hi Ella, it's Kobi. As you know, we are providing now segments profitability and revenues data. And if you go and look and compare the profitability for our land segment between 2023 and 2022, we will provide next quarter also profitability for 2024 numbers. And if you compare the same one for Elbit Systems America, you see that in both segments, as we mentioned, we are expecting and our internal goals are to have increased profitability expansion on the basis in land, of course, increased activity in the land. You saw previous quarter 37% growth in revenue. This quarter 24% growth in revenue in the land segment. It means a lot of operational efficiency in the land segment and also huge improvement in Elbit Systems of America. We took many actions in Elbit Systems of America to improve profitability. So we are very happy with the increased 17% year over year sales in Elbit Systems of America for us is a huge success. And we're very happy with this expansion in revenues which will lead also for expansion in the profitability margin. So those are the two places that we expect increased profitability and increased efficiencies. And the other segments, the other three segments keep rather flat in the profitability numbers while expanding revenue as well.

Ella Fried: Okay, thank you very much for taking my questions. Yes.

Butzi Machlis: If I may add, I would like to say that we are starting to see results to the investments we made in the new ERP system which has cost us a lot in the past. But right now the entire company is on one platform and it's a very good way to reduce costs and to be more efficient. And we are very happy that we have the system operational ready today. And we continue to evaluate our portfolio all the time. And we look for activities which are less synergetic or less or with low GP and we are looking for a way to divest them. That's something we do regularly. And we continue in parallel, we're looking for new acquisitions. We are looking into the portfolio all the time to look for elements which are less relevant for us, like we did two years ago with Ashot Ashkelon.

Ella Fried: Thank you. If I may, another question on this topic. You mentioned a few times that you are going and you're actually starting to see the improvement brought by improvement of the contracts, some of them CPI linked and other improvements and of course lesser inflation in the United States. So, when do you think this impact will be at its peak, the strongest?

Butzi Machlis: Thank you, Ella. So we experienced fixed price contracts without escalation clauses in mostly in Elbit Systems of America. We slashed all the fixed price contracts with the old prices which were relatively lower profitability in Night Vision completely, in Sparton and the Sonobuoys business we expect to slash those contracts next year. So most of the fixed price contract with lower profitability which happened because of the price -- pricing index escalation in the US are behind us. So this is part of the improvement in Elbit Systems of America.

Ella Fried: Okay, thank you very much for taking my questions.

Butzi Machlis: Thank you, Ella.

Kobi Kagan: Thank you, Ella.

Operator: Next question is from [indiscernible]. Please go ahead.

Unidentified Analyst: Hi, can you hear me?

Butzi Machlis: Sure.

Daniella Finn: Yes.

Unidentified Analyst: Thank you for the question. Congratulations on the good result. I have a question about the capex. In the past maybe two or three years, it was just a little bit under $200 million a year before acquisitions of another company. With the recent increase in the backlog and the scale of the operation, do you think you're going to need more capex in the coming years?

Kobi Kagan: Hi [indiscernible]. As we mentioned, we had a very big -- as Butzi mentioned before, we had a very big investment in the ERP system which was around $150 million across several years. And we actually inaugurated the system. The system is fully operational now across the company also in Elbit Systems of America. So this is -- this was -- this is behind us. So, what we see currently is additional investments in the Ramat Beka facility which will wind down during next year. So we estimate the same level of capex investment in 2025 with this year with the winding down of the Ramat Beka investment and the concluding of the investment in the ERP system.

Unidentified Analyst: Okay, thank you. And just to make sure, are you still with the target of 10% operating profit in the medium term, maybe 2026 and beyond?

Kobi Kagan: So as we mentioned again, those are the internal goals. We expect to reach the 10% non-GAAP operational profitability in 2026. And as to our EPS, we expect -- our internal goal is to reach $9 next year and $12 in 2026. So, actually it's doubling the EPS from 2023 to 2026.

Unidentified Analyst: Okay, thank you very much.

Kobi Kagan: Thank you, [indiscernible].

Operator: [Operator Instructions] The next question is from David Fingold of Dynamic Funds. Please go ahead.

David Fingold: Good morning.

Butzi Machlis: Hi, David, good morning.

David Fingold: Good afternoon to you, sorry, the laser contract, is that for both the airborne and the land-based version?

Butzi Machlis: No, the laser contract we got -- hi, David, good morning. The laser contract we got is a production contract for the ground system.

David Fingold: Okay, so it's only for the ground system and I guess is -- and Rafael is the systems integrator.

Butzi Machlis: That's right, they are the system integrators. The order is split, they got half of it. We got half of it from the IMOD. And this is -- that's a production order after the majority of the development was concluded. In parallel, we Elbit, continue to develop the airborne version of the system as a prime contractor.

David Fingold: Okay, and that is -- is that research and development or is there -- or there's a development contract?

Butzi Machlis: Part of it is a development contract and part of it is our own R&D.

David Fingold: Okay. Do you disclose the size of the development contract?

Butzi Machlis: No. No, we cannot.

David Fingold: Okay. Anyway, thank you.

Butzi Machlis: Thank you, David.

Kobi Kagan: Thank you, David.

Operator: The next question is from Stanley Bogen of Bernstein. Please go ahead.

Stanley Bogen: Yes, what is the significance of the decline in sales in Europe considering what's going on now in the Ukraine?

Kobi Kagan: Hi, Stanley. Thank you for the question. So as you see, we have increased -- we almost doubled the sales in Israel and while we still win contracts in Europe, we keep mostly the production with our production limitations and capacity. We keep the same sales in Europe mostly. If you look at three quarters, there is not a significant decline, a small decline in three quarter's revenue. And while our backlog in Europe is they're increasing. So we hope with increased production capacity that we're working on and as Butzi mentioned, our efforts to double the production of ammunition sites, which was fruitful this quarter, to be in a position where we can ship quicker and fulfill our backlog in Europe and other places around the world. So just we see the increased backlog in Europe and of course, of course, we need to supply on this battle.

Stanley Bogen: Thank you.

Operator: There are no further questions at this time. Before I ask Mr. Machlis to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available two hours after the conference ends. In the US, please call 1-888-782-4291. In Israel, please call 03-925-5900, and internationally, please call 972-3925-5900. A replay of the call will also be available at the company's website, www.elbitsystems. Mr. Machlis, would you like to make your closing statement?

Butzi Machlis: Thank you. First, I would like to welcome Daniella. Good luck, Daniella.

Daniella Finn: Thank you very much.

Butzi Machlis: I would like to thank our employees again for their hard work and dedication. To everyone on the call, thank you for joining us today and for your continued support and interest in our company. Have a good day and goodbye.

Operator: Thank you. This concludes the Elbit Systems Ltd. Third Quarter 2024 Results Conference Call. Thank you for your participation. You may go ahead and disconnect